I have Potential State Tax exclusions from Governmental Obligations - exclusion in amount of $213.31 from Edward Jones. What do I do with it?

[domyown2020]

american bond funds

[ThomasM125]

After you enter your tax exempt bond interest in TurboTax off of the 1099 form that is provided to you, you will be asked to choose the state or states the interest is from. When you later work on your state tax return, TurboTax will exlcude the income from taxation as allowed by the laws in that state. 

[ArtieRT]

I could never get TurboTax to work the way the descriptions in the replies in the online community indicated it should.  I poked around long enough to figure it out - at least for North Carolina State tax forms.  Here's how:

1.) From the TurboTax menu choose View, then Forms.

2.)  Page down until you find the D-400 Sch S Wks and select it.

3.) Look for the table Line 18, Column 1, Smart Worksheet, Interest and Dividend Income from U. S. Government Obligations.

4.) Enter your amount manually and it will appear as a reduction in your taxable income on the D-400 form.

[SteamTrain]

@ArtieRT 

You don't actually have to go to Forms Mode to enter those $$....you cans do it directly in the normal interview.  (Desktop only..."Online" can't do it that way at all...as they have no "Forms Mode", so they must use the Q&A interview)

__________

1) If it's from US savings bonds, or US Treasury bonds you own, those interest $$ go in box 3 of a 1099-INT form....and then those $$ automatically show up on the NC D400 Schd S, and included in the subtractions from NC income.

____

BUT...what you may be referring to is the US Govt bond interest, distributed from Mutual funds, or ETFs that are included as a sub-part of the $$ in box 1a of a 1099-DIV.

2) When entering a 1099-DIV with box 1a  $$ on it, and IF a portion of those $$ came from US Bond interest/dividends, you just enter all of the 1099-DIV as-is, then continue to the pages that follow. On one of the following pages the is a series of checkboxes....and you check the one for "A portion of these dividends is US Government interest".  then on one of the pages that follows you will enter the $$ amount you calculated that came from US Govt bonds....and then those $$ automatically show up on the NC D400 Schd S, and included in the subtractions from NC income.

[AmyC]

While you can use Forms mode, that will void the accuracy guarantee.

Let's double check you entered the 1099-DIV correctly to adjust for your state from box 12 dividends:

1. Please return to your federal income
2. Select the 1099-DIV causing concern
3. Proceed through the entry screen
4. Uncommon situations? Select None
5. Continue
6. Select more than one state box
7. Enter your state and the exempt amount
   1. Enter the state and amount or 
   2. select more than one state and the rest of the money that is exempt.

@ArtieRT 

[SteamTrain]

Thus...it depends on whether:

1)  you are trying to enter the $$ from NC Muni bonds  (from box 12 $$ ) ..

...or

2)  the $$ from US Govt bonds....(the sub-part of Box 1a $$)

_____

i.e. there is a different procedure for each bond-type.

[ArtieRT]

Several responses to my post indicate that I should be able to enter the amounts in question from the interactive TurboTax menu queries. 

So, to be specific, I imported the 1099-DIV information using TurboTax's feature that allows me to download the information, online, from my brokerage firm.  It's clear that the download did not "capture" the exclusion amount.  While none of the responses to my post exactly matched what I figured out, your responses did give me enough clues.  Thanks to you all!

Explanation follows.

 I returned to the step-by-step view and to the Wages and Income tab.  From there I chose to revisit the 1099-DIV entries and chose to edit the entries for the appropriate brokerage firm.  I reached the menu below and checked the appropriate box.

This led me to the screen below where I entered the appropriate amount.  

I then went back to the forms view and returned to the table in the D-400 Sch S Wks (for North Carolina).  Sure enough, the appropriate amount was populated in the same manner as my previous manual entry. 

ArtieRT

[ssmith42107]

If the tax exempt interest is from a Federal obligation, how can the interest be attributed to a state?  

[AmyC]

The interest from a federal obligation is exempt from state tax.  Each state has a different way of getting there.

@ssmith42107 

[SteamTrain]

@ssmith42107 

You may be confusing two separate things.

1) Tax-Exempt Interest or Tax-Exempt Dividends refers to interest that is exempt from taxation on the Federal tax return.  These are not Federal obligations...these are interest or dividends paid out by bonds issued by States (cities, counties, townships, school districts), or the US Territories (Like Puerto Rico or Guam, etc).

2)  For US Government obligations,  the interest or dividends paid out from US Treasury Bonds, Notes, Bills, or US Savings Bonds...those $$ are not taxed by the states

___________________________

But the term "Tax-exempt Interest" or "Tax-Exempt Dividend" is used almost solely for case #1.

And in the software, when case #2 is being dealt with, they usually indicate they are referring to US Government Interest, or US Treasury Interest, or interest from  Savings Bonds

[Echo-Point]

In Step-by-Step, when you get to the screen titled "Here's the dividend info we have so far", find the "Broker or Payer" that paid the dividend that included the "Potential state tax exclusions ...", click on [Edit], which opens the screen "Let's get the details from your 1099-DIV ...", {{you'll have already given TurboTax the 1099-DIV figures or have already downloaded those figures from Edward Jones}}, click [Continue], which opens the screen "Did _____ provide their FEIN?", answer, then click [Continue], which opens the screen "Tell us if any of these uncommon situations apply to you". IMPORTANT, HERE IT IS! >> Check the box in front of "A portion of these dividends is U.S. Government interest.", then click [Continue], which opens the screen "Enter U.S. Government Interest." This is where you enter the total of your "Potential state tax exclusions ...". On the tax information packet I received from Edward Jones, this total was titled "Total Income from exempt governental obligations owned by you indirectly." (Evidently "U.S. Government Interest" is the same as "governental obligations". I guess the government has the "obligation" to pay you "interest".) Please note that the numbers involved in "Potential state tax exclusions ..." are not in any of the official forms (1099-INT, 1099-DIV, 1099-OID, 1099-B, etc.), but were at the end of the package from Edward Jones under "ADDITIONAL TAX INFORMATION". All of my exclusions were from mutual funds.

So that's it. In my case, the amount of the "Potential state tax exclusion ..." carried directily to my state tax program, resulting in a lower taxable income, yet had no impact on my federal taxes, as it shouldn't.

Final note: The above can also be accessed from the TurbeTax top menu: Tools>Topic List, then under 2. Federal Taxes, select "Dividend Income - Add, Edit, Delete" under "Dividend Income (Form 1099-DIV)".

[Jerry Ransom]

Thanks for the information, However, I am confused about the question "Choose a State where your Tax-exempt dividends came from" My 1099 doesn't have the State listed and My Turbo Tax doesn't have the option you're showing that provides guidance.  Do I choose my State, which is Texas or Multiple States.  Texas doesn't have state taxes.        

[SteamTrain]

You choose "Multiple States"......especially for anyone living in a state without an income tax (like TX).

Primarily, the selection only has an effect on people who live in states with an income tax..but TTX insists on a selection

_________________________

For any mutual funds you own, that produce $$ in box 12 of a 1099-DIV.....that Fund does have to provide a state breakdown...but you usually have to get it separately from their website.

For example:  Look at the first PDF that Fidelity provides here  (labelled: Tax-Exempt Income from Fidelity Funds:(

Fidelity Mutual Fund Tax Information - Fidelity

[jrminichiello]

Thank you @Echo-Point! This was the clearest, most accurate, and most helpful response I've found for this question.